Many companies do not actively manage and monitor their Chinese suppliers, reveals a new survey

Many companies do not actively manage and monitor their Chinese suppliers and most lack the ability to fully trace faulty imported goods or replace their suppliers in a crisis, according to a recent survey.

The Quality Executive Board (QEB) announced the results of a survey, Supplier Quality Management Practices for China, which highlights best practices and major risks for companies sourcing from China. The QEB is a membership program of the Corporate Executive Board.

The QEB undertook a survey of current practices and perceived risk factors in order to help executives at large companies benchmark their supplier quality management practices for China and to identify common challenges

The Board's analysis reveals that there is still no substitute for having a good team on the ground: Companies who are most confident about their Chinese suppliers rigorously screen and qualify those suppliers.

CEB Program Director Peet van Biljon says, "The research suggests that no company can be complacent about the products and materials they source from China; we are just beginning to understand the full magnitude of the Chinese sourcing problem."

Other key findings include:

1. Nearly 20% report that the cost of sourcing from China can at times exceed the savings: One-fifth of companies report the total costs of managing and ensuring supplier quality in China frequently or occasionally exceed the labour cost savings.

2. Only about a quarter of companies have contingency plans to replace their Chinese suppliers: Companies voiced significant concerns with Chinese suppliers, including poor product quality, loss of data privacy, intellectual property violations, and reputation risks such environmental pollution, product safety issues and human rights violations. Yet most had no contingency plans in place to replace their Chinese suppliers or could only replace some of their Chinese suppliers in the event of a crisis.

3. Companies have great difficulty maintaining traceability of goods sourced from China: Only a quarter of respondents report certified full traceability down all tiers of their supply chain.